In a recent decision the English court has refused to continue an interim injunction that restrained the defendant from dealing with bitcoin held in a coin depot account, over which the claimants had asserted a proprietary right.
In Toma v Murray  EWHC 2295 (Ch) the claimants had sold bitcoin to an account controlled by the defendant. The payment received for the bitcoin was reversed and the claimants were left without the bitcoin and without the money.
Although the defendant did not go so far as to admit that a fraud took place, he was content for the purpose of the application hearing for the court to proceed on the basis that there was a fraud of some sort which was carried out.
The claimants sought to continue a previously granted without notice interim injunction against the defendant, pending the final determination of their claim.
The relevant test
In determining the application, the court referred to the test set out in AA v Persons Unknown & Ors  EWHC 3556 (Comm) at :
"First, there must be a serious issue to be tried, secondly, if there is a serious issue to be tried, the court must consider whether the balance of convenience lies in granting the relief sought. The balance of convenience involves consideration of the efficacy of damages as an adequate remedy, the adequacy of the cross-undertakings to damages, and the overall balance of convenience including the merits of the proposed claim".
For our analysis of the decision in AA please click here.
There were no arguments made that bitcoin was not property capable of being subject to an injunction. This now appears to be an accepted English law principle following the decision in AA.
Is there a serious issue to be tried?
It was held that there was a serious issue to be tried and a full hearing would need to be conducted to determine whether or not there was any fraud on the part of the defendant.
What is the balance of convenience?
In assessing the balance of convenience, the claimants’ position was that as there is a proprietary claim to the bitcoin this should reduce the significance of the question as to whether or not damages are an adequate remedy. In support of this, the claimants relied on the decision in AA involving an injunction against persons unknown for 96 bitcoins, where it was determined that damages would not be an adequate remedy.
In this case, the English court was not persuaded that the balance of convenience lay with the claimants.The court considered that this was essentially a claim for the value of the bitcoin, which is capable of being satisfied in monetary terms rather than relying on the proprietary remedy.
The defendant’s counsel also distinguished the situation from AA, noting that in that case the claimants were unlikely to recover their loss without a proprietary injunction as the defendants had not been identified. In this case, however, the defendant had been identified and had an unencumbered asset purchased for around £4.8 million just over a year ago, in contrast to the value of this claim, which was in the region of £120,000.
It was also stated that, due to the volatile nature of cryptoassets, an injunction preventing the defendant from being able to dispose of the bitcoin at the appropriate time would increase his risk of loss. The claimants (by their own admission) would also have had difficulty in satisfying any cross undertakings in damages if the defendant were to suffer this loss.
The judgement in this case highlights the factors that the court will take into account when considering matters relating to injunctive relief for cryptoassets. It is interesting to note the differing approach taken here, vis-à-vis that taken in AA.
This decision also reiterates the need to establish that damages is not an adequate remedy when seeking injunctive relief, irrespective of whether the underlying claim is a proprietary/tracing claim. It remains to be seen whether this decision will be appealed on this particular issue.